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Towards an Open Advertising Marketplace in 2006

It's exciting to see that others share our conviction that it's time for a truly transparent and open advertising marketplace. Pat McCarthy of Conversion Rater gives it a mention in his shortlist of predictions for 2006.

Meanwhile, others think that "Google's going down", partly because they haven't been as open or transparent as many think they should be. AdSense publishers are left guessing at what share of the gross revenue Google elects to sprinkle upon them. And the black-box approach to selecting which ads will appear is so, well, Web 1.0.

And yet there are some real challenges that need to be tackled, not the least of which is moral hazard. Which is to say, the marketplace needs to be structured in a way that rewards good behavior and punishes bad.

When we launched BidClix back in April 2001, we operated as a blind network. Advertisers targeted their ads to specific channels but were not able to see the individual websites that comprised each channel. Most ad networks still work this way today. But what happens in this context? Advertisers set their prices based on the average quality of traffic in a channel. The best quality publishers, those which have above average quality, are under compensated. And the worst quality publishers, with below average quality, are over compensated. Good behavior is punished, bad behavior is rewarded. Over time, the best publishers leave and the worst ones stay on. Blind advertising networks thus trend downward.

We think we nailed that problem when we launched site-specific bidding. Now advertisers can target their ads to specific websites, and sections within those sites. Good behavior is rewarded, bad behavior is punished. That's the way it ought to be.

But we're not done yet. We're on the road to openness and we know we've got a long way to go. We want to give publishers much more control over which ads will appear on their sites. We respect their judgment, and we think they can do a better job than any old black-box can do on its own. And we want to open up the marketplace to multiple parties who can add value, not just advertisers and publishers. And we believe that trust forms the basis of any good relationship; it can be earned or it can be squandered.

I'd love to hear your thoughts on how we can realize our vision. What does "advertising marketplace" mean to you? What examples of marketplaces do you think represent good models for us? What kinds of transparency do you think are most important? What needs do you have as an advertiser, a publisher, or some other party in the value chain, that are not being met by existing ad networks?